FDI regulation in China - read in the blog of the company COREDO

FDI regulation in China

Updated: 14.11.2020

FIL 2020 is the primary source of regulation for foreign investment in China. The main areas of its application are:

  • Registration of enterprises with FDI;
  • Acquisition of shares in local companies;
  • Investments in new projects;
  • Other investment types allowed by Chinese laws.

Foreign investors can operate in China; however, on limited terms. It is mandatory for them to report all required information to the local financial regulators. Additionally, foreign investors can only invest in allowed sectors, not in those presented in the Negative List. Still, even investing in permitted sectors necessitates a license as well as compliance with national security and administrative conditions. Furthermore, investing in some sectors (such as military or agriculture) or conducting M&A operations requires undergoing a national security audit.

When it comes to enterprises with FDI, they must be registered and obtain approval from relevant market regulators.

Applying for authorization

Those foreign investors who would like to perform M&A deals in China must submit these documents for their NDRC application (national security audit):

  • Description of operation, request for a national security audit;
  • ID or certificate of registration, credit certification documents;
  • ID or PoA to an authorized representative;
  • Description of a foreign and their subsidiaries;
  • Description of a Chinese company that is being taken over, AoA, photocopy of a license, financial statements after audit, organizational charts before and after a deal, photocopies of licenses in which investments are made;
  • A list of future agreements after an M&A deal, a list of appointed BoD members and CEOs;
  • Decisions made at shareholders’ meeting, agreements on share transfers, asset valuation reports;
  • Consent of a title owner to sell the assets in a written form, an agreement to the asset sale, information on all parties, relevant asset reports;
  • Other documents that the Commerce Department may require.

Process of registration

Several steps of security verification must be taken to register a company for investment activities in China. Once an application for verification is received, the NDRC issues a preliminary decision. Sometimes an audit is considered necessary. Then an applicant receives notification within two weeks. After the notification, an applicant has up to five business days to send the regulator a joint ministerial meeting application.

If it was decided within a review period of 30 days that there is no threat to China’s national security, the NDRC authorized an M&A deal. But if it was not, a review process of 60 days starts.


If an operation like a transaction or transfer of shares is considered threatening to national security, investors should keep in mind that it must be terminated.

In addition, after a decision on the security review was made by the regulator, it cannot be appealed and is deemed final.


It is crucial to remember that the distribution of confidential information received during an M&A transaction is strictly prohibited in China. Violation of confidentiality is penalized by disciplinary actions or even criminal charges, in case it was proved to cause considerable damage.

Do you need advice on investment regulation in China? Seeking to start an investment business in China but getting confused over FIL 2020? Contact COREDO to receive a personal high-quality consultation.


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